The Pakistani rupee depreciated to a record low Tuesday on the back of what the currency dealers viewed multiple attributive factors. Though stable against regional currencies, the day saw Pak rupee devaluing by 50 and 20 paisas, respectively, in the inter-bank and open markets. According to dealers, the rupee was trading at Rs 91.70 and Rs 90.50 on the inter-bank and open market on Tuesday against Rs 91.60 and Rs 90.30 of Monday.
“This hike is not unusual and always happens before new fiscal budgets and the Hajj,” said Malik Bostan, chairman Exchange Companies Association of Pakistan (ECAP). Last year, in these days dollar had appreciated to Rs 93 before sliding back to Rs 89, he recalled.
Reasons for rupee depreciation, the money exchanger said, were ranging from the making of pre-budget financial closures by the public and private sector companies to hectic buying of the greenback by the Hajj pilgrims in the open market. Bostan attributed fresh buying spree by the pilgrims to the government’s withdrawal of the $ 1000 traveler cheques it used to provide to Hajis in the past. “Now as Pilgrims are buying dollars by their own before three to four months of the Hajj thus shooting demand for the greenback up,” he elaborated. Bostan warned the general public against purchasing and holding the dollars saying buying should be need-based only. The currency experts believe that interest payments on the country’s external loans, which the central bank has counted at over $ 62 billion, were also pressuring the value of local currency. They said amid poor foreign inflows the repayment of foreign liabilities would be a major drain on the country’s depleting foreign exchange reserves. According to State Bank, up to May 11 (2012) country’s dollar reserves stood at $ 16.103 billion. The continued contraction in foreign exchange reserves was not a good omen for the rupee, warned the experts. “The debt repayments would certainly be a major drain on the dollar reserves if foreign inflows continue to remain poor,” said a currency expert. Even the stock market is not an exception when it comes to rupee-dollar parity as Tuesday saw the equity investors seemed concerned over the rupee losing face against the American currency. According to Ashen Mehanti, a senior stock analyst and director at Arif Habib Securities, the investors moved cautiously due to their “concerns for fall in rupee dollar parity and rising current account deficit”.
